Re: Income property - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 10, 2003 at 10:15:23:
I am wondering if you can find both a 10 cap rate on income and a higher-than-average appreciation in the same location.
At first, when you talked about appreciation, I was going to suggest you invest in inland CA. I expect excellant appreciation here for some years to come. However, I really am doubtful about buying for a 10 cap rate here.
You see, there tends to be a trade off between expected appreciation and expected rental income rates. People in CA pay lower Cap rates for property because they anticipate good return from appreciation. People in many other parts of the country demand high cap rates since they anticipate low appreciation.
I also agree wiht Linda Simms about investing closer to home. If you are a beginner, starting with an $800K property sounds like a questionable idea. I’d recommend starting with less expensive property. That way, if you run into problems, they are likely to be be smaller ones. Hving to make the payments on a mortgage of an expensive property such as you mention could be very difficult from your other resourcesm should something go wrong, such as governmental agency requiring you to close it up.
Learn on smaller properties, where you have less at risk, it seems to me. Then, when you are more comfortable with your operation, you can expand to larger properties. You need to develop your procedures and forms: rental application, checking applicants, rental agreement, building rules, rent collection bookkeeping system, understanding of the tax laws related to income properites, etc.
I’d suggest that you refine your requirement down and do studies of several different locations that you think would interest you–but not the whole country. That is too unfocused, it seems to me. Lack of focus is a big drawback in real estate investing.
Good InvestingRon Starr***